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GOOG and BKS – Can Google Deal Keep Barnes & Noble Alive?

Google is smart to experiment... but B&N has little room for error


Google (GOOG) just announced a partnership with bookseller Barnes & Noble (BKS) that will provide for same-day delivery of books.

goog stock bksIn  select areas, shoppers can purchase books sold from B&N locations and delivered via the fledgling Google Shopping Express delivery service that GOOG has started running in New York, Los Angeles and San Francisco.

It’s an interesting idea, and one that is aptly timed given that internet shopping giant Amazon (AMZN) is currently at war with major book publisher Hachette over pricing and promotion. Amazon is the undisputed king of book sales, commanding a massive 65% of e-book sales and a huge chunk of physical sales. Furthermore, nearly half of all physical books are sold online, and Amazon is at the top of the heap in this category.

So can Google partner up with BKS in a way that helps both companies, or is this just a cute experiment that will ultimately lead nowhere?

BKS Stock has Stabilized

Though Barnes & Noble tried valiantly to stay relevant in the move to digital titles, the company finally admitted defeat this year with news it would spin off its beleaguered Nook  division. Thanks to the bankruptcy of rival Borders in 2011 and the closure of 10% of its stores over the last year or two, B&N has fallen into a pretty stable orbit.

BKS stock is up 22% in the last 12 months to outperform the 13% return for the S&P 500 in the same period as a result.

That doesn’t mean growth, of course. While independent bookstores have been disappearing for years and B&N may be the only physical retailer of books in many regions, we can all agree that it’s not like Americans will start buying twice as many hardcovers anytime soon.

Oh yeah, and BKS is still operating at an annual loss. While the company has posted quarterly profits periodically over the last few years, it hasn’t posted an annual profit since fiscal 2010.

So let’s not pretend like a few cities using Google to deliver books is going to make any meaningful difference anytime soon.

GOOG Stock and Shopping Hopes

Of course, this little experiment is a bit more interesting for GOOG stock owners.

Google always has a lot of irons in the fire, and its “horse in every race” strategy that spans wearable tech to medical gadgets to humanoid robots ensures that the company isn’t just resting on its laurels, banking on its search and advertising dominance.

While it’s undeniable that advertising is driving earnings right now, GOOG stock won’t always be this way.

With increasing integration of its products in to the Android smartphone operating system, Google has managed to become dominant in a number of categories beyond adverstising and search, including email via Gmail, maps via Google Maps and streaming video via YouTube.

There are also other pet projects like Google Wallet to get in on the mobile payments revolution, or Google Fiber that will allow the company to become more of a traditional telecom that provides internet access to customers.

If GOOG stock holders are excited about these other efforts to own every part of the online experience, why not get excited about Google’s foray into e-commerce, too?

Now, clearly the Google Shopping Express effort has a long way to go. It is small scale now, and has a lot of bad history considering web delivery disasters like Webvan that prove the challenge in making a service like this work.

However, even if nothing comes of the Barnes & Noble partnership — or any other deal that’s part of Google Shopping Express — Google will undoubtedly learn some important lessons about internet commerce and how to get a piece of the pie.

That’s great for GOOG stock in the long term, even if the short-term is still going to be driven by Google’s advertising business.

Jeff Reeves is the editor of and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at or follow him on Twitter via @JeffReevesIP

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